Complete question:
Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock as an investment in trading securities for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $34.50 per share. Prepare Fairbanks's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment
Solution:
Given,
Total shares = 400
Trading securities = $13,200
Cash dividend = $3.25 per share
Sales price of stock = $34.50 per share
Note: The image attached shows the journal entries of all the transactions.
Dividend revenue is [tex]400\times \$3.25=\$1300[/tex]
Fair value adjustment is [tex][(400\times \$34.50)-\$13,200][/tex]
The above values are entered in the journal transaction.
